Tax Law (Questions About Taxes)/1120 tax reurn
My business runs on a fiscal year ending Oct.31. On this past years tax return I noticed that my CPA did not put in the tax year beginning and ending date! The dates were supposed to be beginning Nov.1 2011, ending Oct. 31. 2012. But the tax return does have 2011 on the top right side corner. I have called my CPA numerous times with no answer. What should I do about this? Is it a big deal that the dates are not on the tax return? And will hear from the IRS about this? I owe nothing for the year but have a refund that will be applied to this years taxes.
ANSWER: It is good that you have actually reviewed your business tax return. Many business owners fail to do that.
Why your CPA won't return a call is outside the realm of reasonable, but that seems to be the world in which we live now.
I take it the CPA filed it electronically already and you are just looking at your file copy.
While this lack of detail may be foretelling of some other lack of dedication when it comes to tax preparation, this one on its own is not a real problem.
The IRS already knows from your EIN number, your fiscal year, so that won't raise any eyebrows, or concerns that you are trying to pull one over on the IRS.
My read of your statement is that you are profitable but that enough money has already been paid in corporate taxes to offset the tax calculation. If that is true then you are probably fine.
If, you are operating at a loss in your corporation, and you have been operating at a loss for a couple years, then you have a different problem. The IRS's 1 in 3, 2 in 5 rule; which allows the IRS to reclassify your business as a hobby and DISALLOW all of your previous expenses.
The technical term for that is: BAD.
But if you are showing profits, at least occasionally, for the first 5 years of your business, then you would not be subject to that rule.
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QUESTION: Thanks for your reply. Yes, you are correct. My business was profitable and I did pay more than enough to offset the tax calculation. I have another question for you that I forgot to ask the first time. Since my fiscal year ended Oct. 31 2012, I was supposed to file my taxes by Jan.15 2013. I trusted that my CPA sent in them, but unfortunatly he didn't. I didn't find this out til July! So I picked them up and mailed the tax return myself, and I should have caught the year beginning and ending was missing. But I didn't. So, since I owed nothing for the year and actually overpaid, will the IRS look more closely at me. Am I in more danger of an audit since the tax return was mailed late without an extension? And since the tax return was late with me not oweing anything, will I be penalized for filing late? Thanks for all your help. This is really stressing me.
No one can give you an exact answer to the question of "Will it cause me to be audited".
But let's look at what might motivate the IRS to audit.
MONEY. If there is no money, then why bother? and by money I mean enough to make it worth their while. You already paid taxes that you hope to get a portion returned. How much of a refund are you asking about?
INTENTIONAL MISCONDUCT. Tax evasion, systematic and continuous deceptions, etc. Filing late? not a real overt act of sedition.
RANDOM. The IRS claims some randomness but even in the random area there is some target, like randomly auditing personal returns that make over $400,000, or less than $25,000 per year.
Penalties would apply if there was a significant underpayment. I believe you have overpaid.